U.S. encourages South Korea to join Trans-Pacific trade talks

The United States would welcome South Korea joining negotiations on an Asia-Pacific free trade agreement, a senior U.S. trade official said on Wednesday, as Washington continues to weigh Japan's bid to enter the same set of talks.

"We do think it's natural and logical for Korea to join this negotiation. We think they would have a lot to offer," Assistant U.S. Trade Representative Wendy Cutler said in a speech at the Wilson Center, a foreign policy think tank.

The comments came as North Korea continues to rattle the region with threats of war against its southern neighbor. Pyongyang closed access to a joint factory zone with South Korea on Wednesday, putting $2 billion in annual trade at risk.

The United States and South Korea are already free-trade partners under a one-year-old agreement.

Cutler, who was the lead negotiator on that pact, said Washington sees Seoul as a natural ally in helping shape the Trans-Pacific Partnership (TPP) agreement, a proposed regional agreement that Japan has asked to join.

"We would think that Korea would want to work with us and others in the region that want to promote a very high-standard, ambitious agreement," Cutler said.

The TPP negotiations include the United States, Canada, Mexico, Peru, Chile, Australia, New Zealand, Singapore, Malaysia, Vietnam and Brunei.

Bringing in Japan, the world's third largest economy, into the negotiation would set the stage for a final agreement covering the nearly 40 percent of world economic output.

South Korea, the world's 15th largest economy, has been much more aggressive than Japan in negotiating free trade agreements, having already struck deals with the United States and the EU.

"I think the Korean government is very closely examining the possibility of joining the TPP," but is already in a comfortable position because of the pacts it has negotiated, said Gheewan Kim, economics minister at South Korea's embassy in Washington.

SEOUL KEEN FOR DEAL TO OPEN JAPAN'S MARKET

At the same time, South Korea shares the U.S. interest in negotiating a deal that would open Japan's market to more foreign goods, Kim said.

Cutler said Washington was "working very hard with Japan" on its bid to join the TPP, but declined to say how close the United States was to a decision.

It is possible that the TPP countries could welcome Japan into the talk as early as a regional trade ministers' meeting this month in Surabaya, Indonesia.

"If I was Korea and I saw Japan at the TPP negotiating table, I'd want to be there and defend my interests," said Fred Bergsten, director emeritus at the Peterson Institute for International Economics.

Former U.S. trade officials at a separate event on Wednesday cast doubt on the goal of finishing the three-year-old regional trade talks this year.

"While it's true that meaningful progress has been made over the last 16 rounds, the negotiations are not close to conclusion by any reasonable measure," Jay Eizenstat, a former U.S. trade negotiator, said at a Washington International Trade Association event.

Even if Japan stays out of the talks, "I think it would be improbable to conclude negotiations this year. With the involvement of Japan, ... it's optimistic to think they will be concluded by the end of next year," Eizenstat said.

Japan is such an economic powerhouse that it will be hard for the United States to demand that it eliminate virtually all of its agricultural tariffs, which has been Washington's approach with smaller free-trade partners, said Allen Johnson, a former chief U.S. agricultural trade negotiator.

Other issues with Japan, such as barriers to its auto and insurance markets, are expected to be tough to resolve by the end of this year, the former trade officials said.

Don Johnson, a former textile trade negotiator, noted that Vietnam's push for the United States to remove tariffs and other barriers to Vietnam's clothing exports is running into stiff opposition from some U.S. lawmakers.

"Even though we're heading into the 17th round (next month in Peru), we haven't reached the point now where we can tell exactly what (the deal) is going to look like," Johnson said.

"Of course, everyone would like to see it end this year, but that seems fairly optimistic." (Reporting by Doug Palmer; Editing by Xavier Briand and Mohammad Zargham)